If you’ve used a loan scheme since 6 April 1999 via an umbrella company or otherwise, HMRC have stated that you’ll be liable to pay tax on any amounts paid if the loan is not repaid by 5^th April 2019.

In summary:

1. On 5^th April 2019, HMRC will impose a tax charge on any amounts paid by way of loan if the loan has not been repaid.
2. HMRC will include all payments by way of loan since 6 April 1999, which could be through more than one provider.
3. HMRC is giving contractors the opportunity to disclose any loan arrangements they have had in order to agree a settlement before the tax charge is made on 5 April 2019.
4. Contractors are encouraged to provide details to HMRC by 30 September 2018 to give the best chance for settlements to be agreed before the tax charge is applied on 5 April 2019.
5. By disclosing details, contractors may be able to avoid interest and penalties being applied over and above the tax and national insurance owed.

The announcement is here, which also links to other previous announcements and further details with regards to arranging a settlement with HMRC and the information required.

What does this mean for you?

Any payments made by way of loan, which have therefore not been subject to tax or National Insurance deductions will be aggregated to give a total loan amount ‘outstanding’.

For example:

If someone received a ‘loan’ of £400 per week for 2 years (104 weeks), the total amount outstanding would be £41,600. If the loan payments are not returned by 5 April 2019, HMRC will apply a tax charge on the full £41,600 in the current tax year.

The tax and National Insurance due to be paid to HMRC will depend on individual circumstances but could be in the region of £20,000.

What happens if you disclose details to HMRC?

If details are provided to HMRC and a settlement is agreed before 5 April 2019, it may be possible to calculate the loan amounts for each tax year (to 5 April each year from the year 2000 onwards), which could reduce the amounts due.

What should you do next?

If you have never received any payments from a loan scheme or disguised remuneration scheme, you can stop reading now.

If you think you may have been involved in an arrangement where payments have been made to you by way of loan or advance at any point in the last 20 years, we believe you should:

1. Take independent financial and legal advice as a matter of urgency
2. Speak to the operator of the loan scheme/umbrella company to establish any amounts that have been paid to you by way of loan or disguised remuneration scheme. Find out what actions they are taking in light of the impending charge and whether they are discussing it with HMRC
3. Contact HMRC, either directly or via an agent

Your World cannot provide financial advice

As your agency, we are not qualified to give you financial advice.

Please do not rely solely on what your umbrella company tells you. HMRC will also provide free advice if you wish to contact them to discuss any concerns you have.

What does HMRC advise?

HMRC states that since the loan charge was announced, more than 5,000 people have agreed to pay the tax they owe, and a further 20,000 people have contacted them to register an interest in settling.

HMRC also states that they appreciate some people will have genuine difficulty paying what they owe and allow repayment of amounts due over 5 years in certain circumstances. They advise that the earlier those affected discuss and resolve tax avoidance, the lower the amounts due will be.

Contact the right people

If you’re not already speaking to someone at HMRC, you can register your interest by emailing:

• [email protected] for contractor loan schemes
• [email protected] for all other disguised remuneration schemes

What else should you do?

Payment methods operated by umbrella companies can sometimes be unclear. It is your responsibility to understand how you are paid and make sure you are paying the right amount of tax and National Insurance.

If you believe your current umbrella provider is operating a ‘loan scheme’ or ‘disguised remuneration’ scheme, we suggest you change to a fully compliant umbrella company or move to PAYE with us as soon as possible.  We operate a daily payroll for PAYE workers.

In light of this loan tax charge, any offer of a ‘higher retention’ from a loan scheme provider is a false claim, as any initial ‘saving’ in tax on weekly payments will have to be paid back to HMRC, plus potential interest and penalties in April 2019.

If you are registered with Your World Healthcare and would like to discuss this further, please contact [email protected].